Nowadays, getting a driver’s license leads to more and more travel conveniences. Every year, driving exams are taken by many students, and it is not uncommon for many of them to wish to obtain their own car to be much more independent from their parents. However, buying a vehicle has a considerable cost. Young people also have lower incomes, so obtaining a car loan becomes a solution in some cases. But under what conditions can a student obtain a car loan?

Simulate your car loan online

From what age can a student obtain a loan?

Of course, a person wishing to take out a car loan must be of legal age. This condition also applies to other types of loans such as a mortgage, vacation loan, motorcycle/scooter loan, as well as insurance and all other products offered by Crédit Populaire Européen. In any case, the official driving of a car can only be done at a minimum age of 18 years. Therefore, this requirement regarding the student’s majority will not pose any problem.

I am a student, under what conditions can I apply for a car loan?

The various formalities to be completed to obtain a car loan are quite simple. Unfortunately, the student cannot, on their own, be granted such a loan. Indeed, one of the primary conditions for the allocation of a loan is that one must be regularly remunerated. Thus, student jobs are not taken into account: only permanent contracts are valid.

A car loan is typically repaid over a period of three to five years (depending, of course, on the cost of the vehicle). Without fixed income, it is therefore impossible to ensure this repayment. Parents or any other adult will need to guarantee the commitments made for the student.

Furthermore, the student’s parents must be domiciled either in Belgium or Luxembourg. Moreover, anyone aspiring to obtain a loan cannot be listed or reported by the Belgian National Bank. However, it should be noted that some cases can bypass this clause, although, most of the time, these procedures are not the simplest.

What documents are required for the approval of a car loan?

When signing the contract certifying the approval and formalization of the car loan, the presence of the identity card as well as the residence card (for those not born in Belgium) is required. Then, the student’s parents will need to provide their last three pay slips as well as their last three bank statements attesting to the payment of this salary into the bank account. These documents are required for any type of loan.

More specifically and concerning the car loan, the order form is required for new cars. For used vehicles, the registration certificate and the gray card are mandatory, not to mention the private deed.

Example of a car loan

We invite you to use our simulator. You will notice that the APR applied to a new vehicle is lower than for a used vehicle. Why? This is simply due to the fact that the lender’s guarantee is higher. Indeed, in the event of resale, the new vehicle will retain more value. Vehicles less than 3 years old are also considered new.

New vehicle

Used vehicle over 3 years

You have financed a car with residual value. You are nearing the end of your credit contract. Therefore, you need to pay the residual value of your vehicle – typically 40% of the value of your vehicle. What options are available to you? Here’s an overview.

Three options available to you

The catalog value of your new vehicle was €30,000. You have partially financed the car over five years and borrowed 60% of the vehicle’s value, which is €18,000. At the end of your 60 monthly payments (five years), you need to pay a residual value of €12,000 (which is 40% of the vehicle’s value).

Three options:

a.    You have the cash and pay the €12,000 outright;

b.    You plan to change vehicles and sell the vehicle for the residual value price of €12,000. You then repay the residual value;

c.     You don’t have the cash or you want to keep the vehicle after five years. You have no other choice but to take out a classic installment loan for an amount of €12,000.

Car financing and installment loan

The APR for car financing is much more attractive than the APR for an installment loan, which is why if your intention is not to sell your vehicle after five years, it is in your best interest to finance the entire purchase price of the vehicle and not opt for financing with residual value.

Why is the APR for car financing more attractive than the APR for an installment loan?

Essentially for two reasons: First, car financing with residual value concerns new vehicles and thus vehicles in perfect condition. Indeed, it is only under this condition that the vehicle will still have an interesting residual value in the market. Secondly, the sale of a new vehicle comes with guarantees that a used vehicle cannot offer, and therefore the APR is higher.

Conclusions

If you want to buy a new vehicle and sell it after five years, choose car financing with residual value. If you want to keep the vehicle after five years, opt for total car financing.

In Belgium, more used cars are sold each year than new cars. Indeed, nearly 500,000 new vehicles are sold in Belgium, while the used car market accounts for around 700,000 units. Here are a few tips to help you make your car loan with full knowledge of the facts.

When is a vehicle considered to be in the new vehicle category?

In terms of auto financing, you benefit from advantageous conditions and a reduced APR as long as the desired vehicle is less than three years old since its first registration. After three years, it will be considered a used vehicle.

Auto financing or installment loan?

This is another important distinction to keep in mind. If you buy your vehicle from a professional used car dealer – currently, all car brands have a “used car” department – you can get auto financing and benefit from a reduced rate.

However, if you buy your used car from a private individual, you cannot get auto financing. You will have to take out an installment loan with less favorable conditions.

Why such a distinction?

Simply because of the additional warranty associated with the sale of the used vehicle. Indeed, when you buy a car from a private individual, you do not get any warranty on the vehicle.

On the other hand, if you buy your used car from a professional seller (a garage), they are required to provide you with a parts and labor warranty of at least one year and can – if you negotiate well – extend this warranty to two years. This is a legal provision that the professional seller cannot evade.

Since your credit organization has additional guarantees on the loan object, it is normal that the APR affecting your used car loan is reduced and more attractive.

It is entirely possible to get a car loan without a down payment. In reality, a down payment will not affect your APR.

Making a down payment to buy a vehicle can, however, have an impact on the acceptance of your loan application by the lending institution. It is clear that a bank will always favorably welcome a loan application from a borrower who already has the liquidity to pay part of the car’s price.

Financing all or part of the vehicle

It is entirely possible to finance only part of the vehicle and pay the residual value at the end of the loan contract. The residual value can range from 30 to 40% of the amount of the borrowed capital. Note that this formula is particularly interesting for people who change their vehicle every 4 or 5 years. We will come back to this very interesting formula in our next article.

Other important points for financing your vehicle

Financing a new or used car?

Car financing is a special type of loan that follows specific rules. Thus, you can only buy a vehicle registered in Belgium or Luxembourg. You must provide the purchase invoice and your lender will pay the garage that sells you the vehicle directly.

The APR is different depending on whether the vehicle is new or used. A vehicle is considered new up to 3 years after its first registration. The APR is lower for new vehicles. This pricing depends on the market.

The conditions for a car loan without a down payment

There is no limit on the amount for auto financing, and the repayment duration is generally 4 to 5 years but can go up to 7 years in some cases.

Financing a used vehicle between individuals?

In Belgium, car financing is no longer accepted between individuals. In this case, the person buying a used vehicle from a private individual must take out an installment loan. The APR is more favorable for car financing than for an installment loan because the vehicle sold by a garage comes with the warranties of professional sellers (some garages guarantee the used car for up to 4 years).

Important information about car loans without a down payment

When you take out a car loan to buy your car, you give yourself the opportunity to buy the car without having all the money upfront.

You can use a car loan to buy a new or used car from a bank. It is a line of credit, and you will have to repay the bank within a timeframe and at a rate determined by the bank.

There are differences between banks offering car loans, so it is useful to compare the contracts. You can find the cheapest terms or choose the terms that best suit your personal situation.

Borrowing money costs money, so make sure to compare rates and get the lowest one. Knowing what you’re talking about will save you money.

Finally, Cpe Credit displays the current rates offered on our site. We periodically update the interest rate so that people can see where they could get the best car loan rate.